CAG report on Delhi International Airport ill-informed, full of holes

The CAG's report on Delhi International Airport (DIAL) is naive and uninformed. It asks why land was made available to a private developer at reduced rates to build and run an airport for 60 years, and insinuates that the developer, Hyderabad-based GMR group, got a sweetheart deal from the government.

It seems to find it abhorrent that 5% of the land allotted could be used commercially and claims that this would generate a little more than Rs 1,63,550 crore over the next 58 years. So what? While bidding, GMR promised to hand over 46% of its revenues to the government.

Going by the CAG's own methodology and taking the Rs 704 crore paid by DIAL to the government last year, over the next 58 years, GMR will pay revenue worth more than Rs 2,43,140 crore to the government.

The CAG asks why the airport operator should charge a development fee from passengers. Short answer: because state-controlled Airports Authority of India (AAI) couldn't come up with its share of equity and did not want to dilute its shareholding in DIAL by bringing in other investors.

The charge falls under the AAI Act of 1994 that governs Delhi airport, airport regulator Aera regulates the fee and last year, the Supreme Court upheld DIAL's right to charge it.

These are matters of detail, important no doubt, but they miss the wood for the trees. The fact is that almost everything that the CAG finds objectionable today was part of the bidding conditions when the right to build and run Delhi airport was auctioned in 2005-06.

It seems to forget that the GMR-led consortium was only one of five bidders, including big players like Essel, Sterlite and Reliance ADAG group. GMR won because it promised to give the government a higher share of its revenues than the other bidders.

As things go, this was one of the most transparent ways to build a large project as a private-public partnership. The losers did go to court, citing mala fide and lost out.

A committee headed by former metro chief E Sreedharan vetted the fairness of bid evaluation. Today, it makes little sense for an auditor to raise objections or comment on issues it doesn't quite understand.